October Fed hike odds fall to 17% after weak jobs data, but futures still price a December hike above 75%

Traders sharply cut the odds of a Federal Reserve rate hike at the meeting that ends Oct. 28 after the US added only 29,000 jobs in September. CME's FedWatch tool, which is based on fed funds futures, showed a 17% chance of a quarter-point hike, down from close to 36% a week earlier, CNBC reported. On the prediction market Kalshi, October hike odds were 18%, down from almost 70% a week ago.

The two-year Treasury yield, the one most sensitive to Fed expectations, was at 4.768% at 9:54 a.m., down 1.9 basis points on the day, according to CNBC quotes. The Treasury's daily yield curve had it at 4.88% on Sept. 30, so it is down about 11 basis points in two sessions.

The thing everyone got wrong: this is a delay, not a reversal

"Little chance of a hike" is accurate for October and misleading for the year. The same futures still put the odds of a December hike above 75%, and Kalshi had it at 65%, CNBC reported. Markets have moved the next increase by one meeting. They have not stopped pricing one.

That fits what the Fed itself said three weeks ago. On Sept. 16 it raised the federal funds target range by a quarter point to 3.75% to 4%, and its statement was blunt: "Inflation remains elevated," and "The Committee will deliver price stability." One weak payrolls number does not change that. It gives the Fed room to wait for more inflation data.

The week's data pointed the same way. Core PCE inflation for August came in at 3%, below the 3.3% consensus, CNBC noted, and payrolls missed forecasts of more than 80,000. Our jobs report story has the detail, including the unemployment rate rising to 4.2%.

The speed of the swing is also worth noting. Before the report, at 7:30 a.m., Robinhood's prediction markets still priced a 25% chance of a 25 basis point October hike, on about 12,600 contracts traded. In a week, October hike odds fell from about 36% to 17% on futures and from almost 70% to 18% on Kalshi, on two data releases. A firm September CPI reading on Oct. 14 could move them back.

Who it actually hits: a business with a floating-rate line

The bank prime rate, which most small-business credit lines are priced from, is 7.00%, according to FRED. It moves with the top of the Fed's range, so a December hike would take it to 7.25%.

Take a contractor carrying a $150,000 balance on a line priced at prime plus 2, or 9% today:

• Monthly interest now: $150,000 × 9% ÷ 12 = $1,125.
• After a quarter-point hike: $150,000 × 9.25% ÷ 12 = $1,156.25, which is $31.25 a month or $375 a year more.
• Every month the hike is delayed saves this borrower about $31. If it slips from late October to December, that is roughly six weeks, or about $45 to $50.

So the headline swing in odds is worth very little in cash for most borrowers. What matters is that prime is 7% and futures still lean toward higher, not lower. A business deciding whether to term out a floating balance should base that on the rate level and its cash flow, not on whether the next hike lands in October or December.

Fixed-rate equipment and term loans are priced from medium-term Treasury yields, not prime. The five-year yield closed at 5.01% on Oct. 1, down from 5.09% the day before, per Treasury data. Those yields eased this week, and quotes for fixed-rate loans tend to follow with a short lag.

The Fed announces its decision on Oct. 28. Our economic calendar has CPI on Oct. 14 and retail sales on Oct. 15 before then.

Sources: CNBC (CME FedWatch and Kalshi pricing, Treasury quotes); Federal Reserve FOMC statement, Sept. 16, 2026; U.S. Treasury daily par yield curve; FRED bank prime loan rate; Robinhood prediction markets (snapshot at 7:30 a.m. ET). Credit line figures are an illustrative calculation. This is market information, not investment advice.